Five Stages of Debt: Which Stage Are You In?

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debt stages



By: Allison Martin

Debt Stage 1: Denial

In this fast-paced world, many are moving at such a rapid manner that they forget to pay attention to the minor details of major items, including outstanding debt. The average consumer at this stage either fails to calculate how much debt they are in or turn a blind eye (as if it doesn’t exist). Either way, this is a dangerous position to be in. The longer the debtor denies or ignores the issue, the more rapidly the debt will increase (as a result of interest or the minimum payment trap).

Debt Stage 2: Realization

At this stage, the debtor has decided to face the music and come to terms with the situation at hand. They have taken the time out to list the details of each debt and analyze the situation. The list includes but is not limited to: creditor’s name, balance interest rate, minimum payment, and balance. Realizing that a problem exists is not necessarily negative in nature because the debtor is now at a crossroad. They must make a choice to rectify the situation or continue to let it spiral out of control. Hopefully, the debtor will make the correct choice and select the first option.

Debt Stage 3: Depression

If the debtor owes an excessive amount of money to a creditor(s), it is expected that they will experience some sort of depression. (Some skip this stage depending on personality type). A lot of debt incurred in the United States is a result of the “gotta have it” mentality. It has been ingrained in many minds that it is okay to finance items that are desperately desired, even if they will cost way too much money in the long-run. If you don’t agree, take a glance at all the loan and credit card products that exist around us and you will think again. Depression typically sets in when the debtor realizes that they engaged in impulse spending or purchased items that they couldn’t afford.

Debt Stage 4: Perseverance

The debtor will experience this stage if they decide to tackle their outstanding debts. At first, progress will be gradual since the debt repayment process can be lengthy and tedious. However, once the debtor notices just how much they have reduced the outstanding balances, they will have the desire to press on and remain persistent in the debt repayment process until everything is paid off. This stage can be empowering to many because it demonstrates the rewards that result from persistence and determination with anything that an individual does in life, whether or not it involves personal finance.

Debt Stage 5: Bliss

Once all debt is eliminated, the former debtor will more than likely be filled with joy as if he or she is on top of the world. After all, the debt repayment process can be an emotional roller-coaster for many because it takes a lot out of a person. Making sacrifices along with changes in spending habits and personal finance lifestyles as a whole in order to repay outstanding obligations is hard work. However, it pays off in the long run when the individual is released from bondage with the creditor(s), financially free, and has resources to explore the various elements that life has to offer without having to borrow from anyone.

Which debt stage are you in?

Allison is a Financial Coach who educates individuals from a Christian perspective on financial goal-setting, budgeting, saving, debt management, and wealth building. Make sure to check her out at